Digital Distribution vs. Physical Product - Providers Can't Have It Both Ways

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Commentary - Technology

Written by neildittmar

Thursday, 01 April 2010 10:20

Whether you want to call it software as a service like Microsoft started doing nearly 10 years ago, or cloud computing as all the super cool tech players refer to it now, the end result is essentially the same. Distribution of content (including music, movies, games, and even books) is moving at a rapid pace from the physical realm to the digital one. Numbered are the days where we will go to actual stores to purchase "hard copies" of the media that we acquire. Instead, an internet connection will effectively be the primary (if not sole) delivery method for which new media is located, purchased and obtained.

As for contemporary examples, iTunes has showed that consumers are more than willing to embrace a business model where they don't own physical media. If anything, consistently declining CD sales and the sheer number of failed proceeding formats (Minidisk, SACD, DVD-Audio, et al.) is proof positive of that. In the movie industry, the Blockbusters and Movie Galleries of the world are giving way to much more accessible alternatives, particularly On Demand options from Pay TV providers, online distributors like NetFlix, and even game consoles. Speaking of the gaming industry, services like Steam and Direct2Drive are continuing to experience exponential growth, while retail sales have began shrinking a bit. This is particularly evident in the PC market where the presence of titles in your typical Gamestop store ranges from extremely slim to absolutely nil.

So the utopia of digital distribution that content providers have been touting is finally starting to come to fruition. For years we've been told that this delivery system holds so many more benefits than traditional brick-and-mortar models where physical media is exchanged. For providers, it gives them greater control over their products, particularly the distribution aspects falling more in line with the licensing of content that commercial games, movies, and music are subjected to. In fact, digital distribution is the content delivery embodiment of the classic licensing model that says buyers really don't own anything but permitted access.

With consumers begining to jump on the bandwagon and critical markets once dominated by retail sales of physical copies starting to switch over as well, what are the benefits to the consumer? Other than the lack of requiring said media to be physically "in-hand" when accessing, not much. Quite honestly, buyer perks really should be more than this and consumers should start demanding those benefits before their omission is assumed rather than just overlooked.

By design the licensing model, often the EULA included with games and other media, allows the purchaser to access the content they have purchased the license for. That word access is important, as the buyer is effectively paying only for permission to use content that is owned by somebody else. If there is no timeframe specified in the license, the buyer essentially gets access forever. That's what a license solely is... permitted access. The buyer owns nothing outright.

For a long time, content providers were forced to accompany a physical product along with an access license mostly due to technology contraints. This was (and still widely is) incorrectly perceived as "ownership" of content by the buyer. With broadband internet becoming increasingly prolific, this provider "limitation" is becoming less and less of a concern. In the near term future, it's safe to say that the necessity for physical media will only become increasingly diminished, eventually leading to its demise for all but the nostalgic.

While this may be all fine and good, the problem is that todays content distributors really want to have it both ways... receiving their proverbial cake and being able to eat it too. If the licensing model was as it should be, I would not have to pay additional fees to reacquire the digital content I have purchased a license for. I've already paid for access and that is precisely what I'm buying in the digital age. On the contrary, some distributors charge a fee (one-time or annual) for the priviledge of reacquiring content. In some cases, this fee can be a significant percentage of the original licensing cost. Given the way digital distribution works, a small fee should be incorporated into the purchase price itself for maintenance of servers, etc., not a 10-20% (sometimes recurring) tack-on later. In that case, I'm still "purchasing media" and I really shouldn't be given the licensing model. This is only one example of the antiquated "purchase" methodology continuing to be carried on by content providers, while still claiming that the buyer truly owns nothing but access.

In more extreme cases, the license purchased is directly tied to the specific download or the initial hardware the corresponding content is accessed on. This scheme essentially forces the buyer to re-purchase a license if the content itself becomes inaccessible or the hardware device must be replaced. Nintendo is only the latest perpetrator of this false ideology, as downloadable content purchased for the DSi is non-transferable to the companys upgraded DSi-XL product, or even another DSi. This goes entirely against the concept of licensing media via digital distribution and is more akin to the purchase model that distributors have purportedly been trying to get away from for so long. That is, "if the disk (or download or device) is replaced, consumers must repurchase their licenses to their products at full price." Once again, an antiquated line of thinking by content producers who wish to reap all the benefits of digital distribution while still remaining firmly entrenched in old ideologies to generate a few more dollars.

On the subject of purchase price, the primary aspect of digital distribution that makes it so ideal for content providers is the lack of physical production or packaging of said media. This reduces costs substantially for the provider and in-turn should result in some form of cost reduction to the consumer. So far, that just hasn't happened. PC games and movies distributed digitally are often the same price as their retail store counterparts, without the buyer getting the benefit of a physical copy, documentation or other inserts of course. Console games available "on demand" are sometimes higher priced than at the store with an equivalent lack of anything physical or tangible. It's easy to see the problem here and a mystery why consumers have continued putting up with it thus far.

Though the skewed pricing model is certainly a big concern, the most glaring offense is that in a high majority of cases, the consumer is required to purchase multiple licenses to access identical content across hardware platforms. If I purchase a retro arcade title on Microsofts Game Room for my PC, why do I need to pay again (additional fees or re-purchase) to play on the Xbox 360 when the product, sub-platform and even the provider source is identical? I may even need to pay again if I move to a different machine or do something as innocuous as sign onto the same machine with a different account. The piracy argument aside, this also goes directly against the model of consumer licensed content that distributors have held in such high regard for literally decades. Using music CD's as an example, what if I had to purchase a separate album for every "device" I wanted to play it on? That's precisely what digital distribution for some content is becoming. It's unreasonable.

Before content providers become too fat from all the cake their ingesting, consumers need to make motions to right some of the wrongs with the current digital distribution model. If "licensed" content is what the industry has always wanted, then the full consumer benefits of that choice need to be realized as well. On-demand access is just one part of the package. Access to content must be tied to the individual purchasing and agreeing to the license, not a specific hardware device or other "tangible" that is subject to replacement or demise. Assuming that there are no time constraints contained, I should never have to pay repeatedly to reacquire licenses to identical content that I have already paid for previously. As for tying licenses to specific downloads or devices, the license purchase directly implies access to the software necessary as one is completely useless without the other. Consumers also need to see a price reduction in downloaded content vs. physical media, since we've been told for years that factors such as production, packaging, distributing, and displaying of "hard product" have been such high contributors of escalating end-user costs.

With digital distribution growing each and every day, providers and consumers are at a very pivotal crossroads regarding the rules for not only how content is obtained, but cost and usage as well. The bottom line is, many of the "rules" for physical distribution cannot be applied here or simply don't work outright when the delivery mechanism is converted to digital. Consumers need to realize some of the complimentary benefits of the licensing model that providers have already began experiencing. In short, content distributors simply shouldn't have it both ways.

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Comments

|Administrator |2010-04-01 08:34:43 Quebus - It's always about the money...

This really does feel akin to the cycle of bundling and then unbundling products and services to ratchet up the profit over time. When you can't bundle any more things together and your customer won't bear any further (highly visible) price increases, you simply start unbunding things again (eg. "That's no longer included". Of course the price of the bundle stays the same and covers less.

So just like my box of crackers is getting smaller while the price stays the same, digital media types are introducing all these add-on "zingers" too. It's more of a digital "peep show" than a rental or licence.

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